The talk of the town among investors, analysts, and bankers these days is whether or not we are currently in the midst of another tech bubble. Silicon Valley based venture capitalists such as Marc Andreesen and Peter Thiel have come out and argued forcibly against the notion that a web 2.0 internet bubble is brewing.
Andreeson argues that big name tech companies are too undervalued (in terms of P/E), and that the market is still ‘scarred’ by what happened in the last tech crash ten years ago. Thiel adds that because social media companies are privately held, its unlikely that the public could contribute to inflating these values. Startup Guru Steve Blank, on the other hand, thinks there are most certainly the beginnings of a bubble in the tech sector…
Not that we don’t trust these guys, but given their status (Blank aside) as early investors and/or board members on a number of social media companies, it might be more apt to take a look at recent IPO performances to get a better read on what’s going on with a possible bubble.
LinkedIn (NYSE:LNKD) was the first web 2.0 company to start bubble talk this year, pricing on the NYSE at $45, but opening that day in trading at $83 per share. The stock boomed to over $122 in its first day on public markets, then gradually receded towards $63 over the course of a month. However, in the past few weeks the stock has regained lost footing, shooting back up over $93 in trading today. LNKD has a current P/E of 2,570.68 and total market cap of $8.82 billion.
Yandex (NASDAQ:YNDX) the Russian search leader was the next big tech company to IPO after LinkedIn, and fanned more flames of investor frenzy in the hype leading towards it debut. YNDX priced at $25 per share before opening in trading at $35 per share, reaching highs over $42 in its first day on markets. The company has lost some pace, and hovered around the $30-35 price range in recent weeks, currently at $34.39. YNDX market cap is 11.5 billion and has a P/E of 74.64.
Pandora (NYSE:P) the internet radio leader was the latest and greatest social media company to IPO this year, pricing at $16 per share then opening closer to $20. The company soared over the $25 mark on its first day before giving back the rest of the week. The stock has been highly volatile in trading as its price continues to swing up and down on a whim. P is currently going for $18.41, having already hit lows of $12.41 and highs of $26 in less than four weeks on the market. Pandora has a market cap of 2.94 billion and no P/E (its still losing money).
Fusion-IO (NYSE:FIO) is one of the year’s most successful tech IPOs that has flown under the radar, quietly outperforming its attention-eating social media contemporaries. The data storage and flash memory developer priced at $19 per share, opened at $25, and is currently trading at $32.18. The company swung as high as $37 before leveling off last week. At current share price the company posts a gain of 61% from its initial pricing, and has a market cap of 2.5 billion on no P/E (also losing money).
The info here should help you decide on your own whether or not we’re entering on the brink of a new tech bubble. Expect more data to add to the mix with forthcoming IPOs from Groupon, Zynga, Facebook and others.